Intellectual Property & Food: Patents vs Trade Secrets

With global retail sales of $4 trillion (£3.1 trillion) annually, food and beverage is one of the largest sectors in the world – the top 50 food manufacturers account for 20 per cent of global packaged food retail sales¹. Food conglomerates and FMCGs regularly develop innovative food products to provide consumers with easy cooking and eating choices. Whether it’s Uncle Ben’s Rice, Heinz Ketchup, or Twinkies, there are iconic favourites in every household.

Posted May 2, 2017

Thousands of food products are sold every day and companies place a high focus on branding to distinguish themselves in such a broad market.

It can be difficult to remain competitive in the market which is why many companies turn to intellectual property to protect their food products.

Food recipes and production processes can be protected in a variety of ways, there is no right or wrong way but some methods are more successful than others. Typically, businesses will either have a trade secret or a patent and to protect brand identity, they may use trademarks or sue other companies for passing off.

Unlike patents, there is no process for having a trade secret. Trade secrets are just secrets, and if someone outside the company discovers it, you cannot seek any protection for it.

Patents provide a maximum of 20 years’ protection yet are much harder to obtain. There are certain criteria that must be fulfilled to get a patent.

One of the main criteria for patentability is that the invention must be novel. To an average person it may be difficult to determine if, for example, one soup product is different from another soup. However, the difference and innovative solution may be at the molecular level which could make it patentable.

In this situation, food ingredients would constitute a combination of chemicals which it is possible to obtain a patent for so it is logical this should be applicable to recipes and food items as compositions of different chemical components.

What does the law say?

For patentable subject matter, the invention must be:

• Novel
• Non-obvious (US) or involve an inventive step (Europe)
• Useful (US) or be susceptible of industrial application (Europe)

Under US law, 35 U.S.C 101 states “whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvement thereof, may obtain a patent…”²

The ingredients in the recipe itself constitutes a “composition of matter” and therefore can be patentable. If a certain step is required to create the food during manufacturing, then it falls under “process”.

To obtain a patent however, it must be novel.

If it has been disclosed to the public, in advertising for example, it cannot be patented as this counts as prior art. This includes sharing the information online, in a video, in a lecture, or a publication. If it has been disclosed to the public in any way, shape or form, it is not patentable because it is no longer new.

If the invention has been disclosed to the public in any way, shape or form, it cannot be patented because it is no longer new.

Additionally, it must be nonobvious. Most utility patents are rejected under these criteria. It can be very difficult to get this especially if you want to patent the formula, in most cases, formulas are a combination of obvious ingredients and therefore not novel.

The inventor must show that the final product is produced in an unexpected way, whether it involves a new way of cooking or creating in which case a patent may be granted for the process rather than the “composition of matter”.

It is much easier to obtain a patent for food technology than recipes which is why, typically, organisations rely on trade secrets for recipes.

Organisations rely on trade secrets for recipes.

Food technology and processes

Patenting food technology is usually much easier than recipes as it’s easier to identify and describe a distinctive step in the food production process. It’s also possible a patent could be granted for the design of a food product.

The ‘crustless sealed peanut butter and jelly sandwich’ and ‘boneless’ fish

Peanut butter and jelly is not a novel ingredient, neither is the combination of the two in a sandwich. The sandwich is distinguished from others as it is crustless and crimped together to prevent leaking.

The production process allows the sandwich to be novel because the crimping of the sandwich is a nonobvious use. However, if it was just a crustless sandwich, the crustless aspect of the sandwich would be an obvious use of a sandwich.

Another example is “boneless” fish, fish prepared with heat and pressure so the bones in the fish are edible. The invention reduced the hassle of separating the bones from the fish and also reduced waste.

This was patented by Ajinomoto Corporation in Japan in 1997 and has now expired.

Having a patent can bring many advantages to a company:

• The competitive advantage of preventing another company from patenting a similar product
• It gives the product credibility – consumers don’t need to understand the intricacies of patent law but appreciate the perceived value of a patent pending product
• The right to produce and sell that product to consumers exclusively
• Extra revenue can come from licensing technology to other companies

However, there are some disadvantages too:

• It discloses the process or ingredients to the public, so after expiry of the patent, companies no longer have a monopoly
• It can be costly to maintain the patent with renewal fees every five years
• It can be time consuming – some products have a patent pending for several years
• Legal issues can arise with defending patents against infringement suits

Flavours and recipes

Patenting flavours and ingredients is quite difficult because the distinctiveness is at the molecular level; it can hard distinguishing between one recipe and another. It can be patented but the success rate is low.

Most recipes rely on trade secrets. This is the most effective way of protecting a recipe – providing it remains secret within an organisation. The risk that a company carries in having a trade secret is that a competitor may reverse engineer or discover the secret formula and use it in their products.

Trade secrets usually require some sort of confidentiality agreement, and if an ex-employee reveals the secret, the company can sue them and get monetary damages or an injunction. If it’s discovered through reverse engineering by another company however, there is little protection available.

Probably the most famous example of a trade secret is the Coca Cola recipe. They decided to keep the recipe a secret rather than patent it because they did not want to disclose the ingredients to the public and kept the formula in a high security vault. The risk has paid off, any patent would have long since expired which would have given their competitors the opportunity to use and commercialise it.

Rumours surrounding the recipe include only two employees know half of the recipe each or that only two people in the world know the combination to the safe where the recipe is kept.

In 2006, an employee stole the Coke recipe and tried to sell it to Pepsi; this was miscalculated – Pepsi informed the FBI. This is an example of what can happen when a trade secret is stolen and revealed by employees – there can be serious legal implications and monetary damages are often demanded.

Establishing non-obviousness with recipes can be problematic because in most cases, combination of ingredients is common and obvious. To get a patent, the inventor must do something out of the ordinary with the ingredients.

Some of the advantages of having a trade secret recipe are:

• No application process
• No registration costs
• No need to disclose it with the government or an institution

The disadvantages include:

• Weaker protection
• No legal protection if someone reverse engineers a recipe
• A trade secret could be patented by another company if they discover a patent doesn’t exist

Summary

• Patents are better for protecting processes and food technology
• Recipes can be patented but it is very difficult to get one
• Most recipes are protected by trade secrets

Footnotes

1. #
2. https://www.uspto.gov/patents-getting-started/general-information-concerning-patents#heading-4